Category: Federal Reserve

This past December, after a 7% year-over-year inflation increase, Federal Reserve Chairman Jerome Powell reversed course. He declared that inflation was not transitory and laid out his plan for how the Fed would start fighting it.

In capitalism, the government’s role in creating new money is limited. It mostly moves around money that is already in the economy, funds itself by collecting taxes or selling government bonds, and then spends that money back into the economy.
 

The European Central Bank, Sweden, Denmark, Switzerland, and Japan have all implemented some form of ‘negative interest.’ However, none of these countries or regions have seen commercial banks charging their customers for depositing money.[i]

There is no way to know for sure. Still, when the Fed adds money to the economy by buying bonds from non-banks, the stock market seems to go up. When they subtracted cash from the economy by not reinvesting mortgage payments (quantitative tightening), it went down.

In February of 2019, two months after telling the world that the Fed balance sheet reduction plan was on autopilot, Chairman Powell announced that the Fed would soon unveil a plan to end it